Amsterdam-based company Koninklijke Philips N.V. has been ordered to pay more than $62 million to settle charges brought by the Securities and Exchange Commission (SEC) for violations of the Foreign Corrupt Practices Act in its sales of medical diagnostic equipment in China.
According to a release by the SEC, investigators found that Philips China, the company's Chinese subsidiaries, used discounts that posed a risk of improper payments to government workers. The SEC also found instances of improper conduct by employees and distributors, including providing funds to hospital officials in exchange for help with the procurement process, as well as tailoring technical specifications for a public tender with hospital directors so that only Philips China and two other manufacturers could qualify, the SEC reported.
"This matter highlights the need for companies to design and implement internal accounting controls sufficient for the scale of their business," Charles Cain, Chief of the SEC Enforcement Division’s FCPA Unit, said in the release. "Despite remediation done in connection with its prior violations, Phillips nevertheless failed over the course of several years to implement sufficient internal accounting controls with respect to its sales of medical technology products in China."
The probe also discovered that employees and distributors engaged in improper bidding practices by submitting bids with other manufacturers' products to meet minimum bid requirements under Chinese law, the SEC reported.
Philips previously faced charges of similar misconduct in Poland between 1999 and 2007. In response to the SEC's findings, Philips consented to the order without admitting or denying that it violated the books and records and internal accounting controls provisions of the Securities Exchange Act of 1934 and agreed to pay $15 million in civil penalties and more than $47 million in disgorgement and prejudgment interest. The investigation was conducted by Christine E. Neal, Michael K. Catoe, Paul W. Sharratt, and Sonali Singh, the SEC stated.
